The Ford Motor Co. that Alan Mulally took charge of in 2006 was a dizzying jumble of eight brands and numerous regional fiefdoms. It built 97 distinct nameplates on 27 platforms -- and lost an average of nearly $2,600 on every vehicle sold that year.
Internal consolidation and streamlining
|Promise: Ford figured it could be far more efficient and profitable by unifying regional business units and streamlining the product lineup to focus on the company's core mission.|
Pitfalls: Getting executives who are accustomed to turf battles to work together isn't easy. A one-size-fits-all strategy risks sacrificing local knowledge and strengths.
Essential ingredient: A clear plan executed by a strong leader. Then-CEO Alan Mulally got management, the Ford family and plant workers to work toward a common goal.
It wasn't hard to figure out Ford couldn't succeed that way anymore. Indeed, several of Mulally's predecessors took stabs at making the company more cohesive. But he finally got everyone in the company, from Ford family members to plant workers, on board with a solution that worked.
Mulally's simplistic-sounding plan to create "one Ford" transformed the automaker just in time for it to weather the recession without the multibillion-dollar bailouts needed at General Motors and Chrysler.
"We're going to merge with ourselves," Mulally said shortly after his arrival, when reporters studied Ford's ugly balance sheets and asked whether it needed a partner to survive.
GM CEO Mary Barra borrowed that phrasing in recent months to turn down overtures from Sergio Marchionne. Mulally showed the best merger plan might stem from a good, hard look in the mirror.
With the launch of its redesigned Edge and Taurus in China this year, Ford has completed the platform consolidation portion of the original One Ford plan, moving from 27 global platforms to just nine today. It now intends to eliminate one more in the coming years by combining its midsize and large car platforms, said Hau Thai-Tang, Ford's vice president of global purchasing.
Yet Ford's global sales are about the same now as they were when its product lineup was far more complex.
"Higher volumes on fewer platforms means a lot of scale globally," Thai-Tang said at last month's J.P. Morgan Auto Conference in New York. "And this translates into much more efficient use of engineering and capital investment. This is a huge source of efficiency for us. We've taken those efficiencies and reinvested it into doing more products faster -- having a much fresher showroom lineup -- and also those global products enable us to go into new markets much quicker."
Nearly one-third of Ford's sales now are vehicles built on its compact C1 platform, including the global Focus. Previously, Ford built and sold different versions of the Focus in various parts of the world, forcing plants to source unique parts and making it difficult to match production with demand.
And, of course, the company pared its brand roster to just two: Ford and Lincoln. Even that was a concession for Mulally, who originally wanted to ditch everything but the core Blue Oval lineup.
The result: Ford's automotive operations earned about $400 per vehicle sold in 2014, a $3,000 swing in eight years.
There are costs, though. Dumping six out of eight brands means Ford has much less to offer some customers, including those in the market for luxury vehicles. And moving everything to common global platforms means vehicles aren't as tailored to nuances in different markets' tastes.
Ford's fractured structure dated to its founder, Henry Ford, who established company operations around the world that functioned largely independently of one another. It was feasible at that time but far too inefficient for the costs necessary to compete in today's industry.
"We had Ford Argentina, Ford of England, Ford of Japan, and that legacy remained with us for almost 100 years," Thai-Tang said. "So we had a lot of redundancy and overlap. When Alan Mulally joined Ford, he saw that, and with his outsider perspective, he said, 'You guys are an international company, but you're not operating as a global company,' and he really drove that convergence."
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